NEWS
Good News Is Bad News (Again)

It was a rough end to the week, as better-than-expected labor market data pushed any hopes of additional Fed rate cuts further out of reach. Energy stocks were the sole green sector today as new sanctions on Russia drove crude prices higher. As we head into next week, eyes turn from the Fed to company earnings and Trump’s economic policy plans, with investors hoping this recent dip is indeed just a dip. 👀

Today's issue covers why stocks got smacked by good economic data, two very different Constellation stock outcomes, the social media stocks betting on a TikTok ban, and more from the day. 📰

Here’s the S&P 500 heatmap. 1 of 11 sectors closed green, with energy (+0.41%) leading and real estate (-2.46%) lagging.

And here are the closing prices: 

Most bullish/bearish symbols on Stocktwits at the close: 📈 $AMTM, $NBY, $DTIL, $ITCI, $PTLO 📉 $ALGS, $OSCR, $IGMS, $GOLD, $SNDL*

*If you’re a business and want to access this data via our API, email us.

ECONOMY
Strong Job Market Showing Shellacks Stocks 😨 

We’ve been talking about it for quite some time now, so we’re not going to belabor the subject again here. But we need to cover today’s labor market surprise.

December’s nonfarm payrolls report showed hiring increased by 256,000 for the month, well ahead of the 155,00 expected and up from November’s 212,000. 📊 

Average hourly earnings rose 0.3% MoM and 3.9% YoY, while the unemployment rate ticked down by 0.1% to 4.1%. Meanwhile, a broader jobless measure fell by 0.2% to 7.5%, its lowest level since June 2024.

Once again, the labor market has shown significant resilience in the face of higher interest rates. And while that’s good for the economy, that’s bad for the stock market. Because if the economy is holding up well, inflation risks remain to the upside, and the Fed is unlikely to cut interest rates anytime soon. 😢 

As a result, stocks and other risk assets sold off, and the 10-year yield hit a new year-to-date high as it approached the oh-so-scary psychological level of 5%. 😱 

Wall Street banks, strategists, analysts, and other forecasters are now tripping over each other to adjust their expectations, with Bank of America even saying this current rate-cutting cycle is over. We’ll see what next week’s inflation data brings, but the fear on Wall Street is that rates are going to stay higher for longerer (yes, we said longerer on purpose to make a point).

Stocktwits users' expectations for stocks are mixed, with bullish and bearish responses nearly evenly matched after 2,500 votes. 🤷 

Meanwhile, this chart from the University of Michigan’s survey shows how different economic perceptions can be among Democrats and Republicans. The latest survey shows Republicans expect essentially 0% inflation (down from nearly 4%) over the next year, while Democrats’ expectations more than doubled from under 2% to 4.2%. 🙃 

The Fed has a difficult job of directing what’s perception and what’s reality, taking only into account what it feels most accurately reflects the economy’s prospects as it makes decisions around interest rates. Right now, the data (and the bond market) are screaming that the risks to inflation are to the upside, and more rate cuts are not needed as long as the economy and labor market remain resilient.

We’ll have to wait and see how the Fed reacts in the coming months and quarters. But for now, the market is adjusting its expectations further toward a “higher for longer” interest rate regime. As a result, traders are preparing for more volatility ahead as we head into the start of another earnings season next week. 😵‍💫 

PRESENTED BY STOCKTWITS
Daily Rip Live With Jordan Lee & Michael Nauss 📺️ 

The co-hosts discuss the labor market’s upside surprise, Jensen Huang sending quantum computing stocks into a tailspin, Tesla’s resilience, the outlook for Bitcoin and semiconductors in 2025, and hidden opportunities in this volatile market. 👀